Canadian woes and a (British) summer of discontent

May 6 - 10, 2013

AMERICAS 

Market comments: Last week, global markets hit record highs (yet again). Bernanke will help maintain market liquidity, which caused market optimism in the US. Unfortunately, the TSX did not fair as well. Job gains were lower than expected, causing unemployment to remain at 7.2%, and the TSX to stumble towards week’s end. The loonie’s performance was similarly poor and it continued to fall. While it is just below the US dollar now, some forecasters believe the loonie may fall to 90 cents to the dollar.

The unemployment report also revealed some interesting job trends: service-sector employment has increased 1.6 per cent in the past year, but goods-sector employment has shrunk 1.6 per cent. Apparently, every substantial GDP slump in the past decade (there have been seven of them) has been presaged by a significant slowdown in goods-producing jobs. 

Company news:  Microsoft is planning to change key aspects of its windows 8 platform. The Financial Times reported it is “one of the most prominent admissions of failure for a new mass-market consumer product since Coca-Cola’s New Coke fiasco nearly 30 years ago.

A small London based firm may have the deciding vote on whether JP Morgan  Chief Executive Jamie Dimon will remain as chairman.  The firm, Governance for Owners, has the deciding power over Blackstone’s shares (6.5%).

International News: A striking parallel between Australian and Canadian economies: “Both countries are commodity powerhouses, with strong connections to the Chinese economy; both countries have seen their currencies soar in recent years; and both are facing uncertainty in their banking sectors, with weakening housing activity.” As the Australian Central Bank cut interest rates, it has sparked speculation about the Bank of Canada’s next move. “The question now is whether strong Australian stocks are suggesting Canadian stocks should rise, or whether weak Canadian stocks are suggesting that Australian stocks should fall.

Otherwise: It has come to light that Bloomberg reporters and staff were able to access information about other Bloomberg terminal users. Goldman Sachs and JP Morgan have complained so far.  Apparently, one reporter called Goldman Sachs inquiring whether someone still worked there, as they had not been active on their terminal for some time.  Bloomberg had been aware of the issue since 2011, but had not acted. Good for Thomson, I suppose!

UK/EMEA

Lord Lawson called for Britain to leave the EU.  When “asked whether Lord Lawson's comments had given UKIP a boost, Mr Cameron said: "I think it's been a good day for the pledge that, if re-elected, I will hold to it in a referendum, so that everyone can have not just a voice on everyone's future in Europe, but a vote on our future in Europe."

One must remember, however, that leaving the EU would also mean Britons would not be able to work easily in the EU, trade would become more difficult, and it would likely result in less investment in the UK from abroad. While trade to BRICs may increase after a Brexit, over half of UK imports and exports are within the Eurozone, and it is unlikely that amount can be made up easily.

The African Progress Report by Kofi Annan “calculates that five deals concluded between 2010 and 2012 collectively cost Democratic Republic of the Congo $1.4bn in foregone value – equivalent to 7 per cent of national income, or twice the country’s national education budget.” It seems that Mr Gertler, bought assets at an undervalued price and sold them to ENRC. ENRC paid more for the assets as money was used to finance additional deals (but really lining his pockets) and causing the Congo to lose revenue from the purchases.